Professional articles
Short, clear guides on Israeli profit distribution tax — for CPAs and tax advisors. Translated from the Hebrew originals.
Amendment 277: the additional tax on undistributed profits
Scope of sections 81A–81F, computing excess profits and the exemption tests
Sections 81A–81F of the Israeli Income Tax Ordinance (Amendment 277): the 2% additional tax on excess profits, how excess profits are computed and the exemption tests — with a numerical example.
Read the guide →- Section 81 · undistributed profits
The fixed shield, the expenses shield and the assets shield
Computing the shield for determining excess profits under section 81C
The three shield alternatives in section 81C of the Israeli Income Tax Ordinance: a fixed shield of ILS 750,000, an expenses shield based on a three-year average and an assets shield net of special assets — with a numerical example.
9 min readRead → - Section 81 · undistributed profits
The 2025–2030 transition rule
Distributing excess profits accumulated up to 31.12.2024
The transition rule in section 81 of the Israeli Income Tax Ordinance: distributing 20% of excess profits accumulated up to 31.12.2024 instead of 50%, and the separate computation in 2026–2030 — with a numerical example.
8 min readRead → - Section 62A
Section 62A(a) — the wallet company
Attributing income from management services and employment-like income earned through a company
Section 62A(a) of the Israeli Income Tax Ordinance (the "wallet company"): when company income is attributed to the shareholder, how it is attributed, splitting between activities and the distinction from section 62A(a1).
8 min readRead → - Section 62A
Excess profitability — section 62A(a1)
Scope conditions, the profitability test and attribution to active shareholders
Section 62A(a1) of the Israeli Income Tax Ordinance: attributing profits from a personal-exertion activity to active shareholders — profitability above 25%, turnover up to ILS 30 million per controlling shareholder, and the 2025 transition rule.
9 min readRead → - Benefited / preferred enterprise
Trapped profits in approved, benefited and preferred enterprises
The tax on distributing profits accumulated under the Law for the Encouragement of Capital Investments
The tax on distributing profits from an approved, benefited, preferred or preferred technological enterprise: "top-up" corporate tax on exempt profits, and dividend tax at a reduced rate.
8 min readRead → - Dividends and controlling shareholders
Dividend tax for individuals in Israel, 2026
Tax rates, surtax and withholding at source
Israeli dividend tax for individuals in 2026: 25% for a shareholder who is not substantial, 30% for a substantial shareholder, and a 3% + 2% surtax above the threshold — with a numerical example and a free calculator.
7 min readRead → - Dividends and controlling shareholders
Salary vs. dividend
Comparing the overall tax burden of withdrawing profits for a controlling shareholder
Comparing the overall tax burden of salary and dividend for a controlling shareholder in an Israeli closely held company: corporate tax, dividend tax, tax brackets, National Insurance and surtax — with a numerical example.
9 min readRead → - Dividends and controlling shareholders
Shareholder loans and withdrawals
Sections 3(t), 3(t1) and 3(j) of the Israeli Income Tax Ordinance
Imputed interest on a loan to a shareholder (section 3(t)), the treatment of unrepaid withdrawals by a substantial shareholder (section 3(t1)) and loans between related parties (section 3(j)) — with a numerical example.
9 min readRead → - Dividends and controlling shareholders
Grossing up a dividend
Computing the distribution needed to receive a requested net amount
Grossing up a dividend: computing the gross dividend needed to receive a requested net amount and the profit before corporate tax needed — including the effect of the surtax and the gap between withholding and the final tax.
7 min readRead → - Dividends and controlling shareholders
Distributing a dividend in an Israeli limited company
The distribution tests, the decision, withholding at source and the link to section 81
Distributing a dividend in an Israeli limited company: the profit test and the solvency test, the board decision, 25% / 30% withholding at source, and the link to the distribution requirement under section 81 — with a numerical example.
7 min readRead → - Dividends and controlling shareholders
Dividends between companies
Section 126(b), holding companies and taxation along the chain
Dividends between Israeli companies: the section 126(b) exemption, deferring tax in a holding company, the tax on distribution to an individual, and the effect of sections 81 and 62A on a holding chain — with an example.
6 min readRead → - Dividends and controlling shareholders
The substantial shareholder
The definition in section 88 of the Ordinance and its consequences
Who is a substantial shareholder under section 88 of the Israeli Income Tax Ordinance: a 10% holding alone or with a relative, directly or indirectly — and the consequences for dividend tax (30%), withdrawals under section 3(t1) and more.
5 min readRead → - Section 81 · undistributed profits
Tax estimates and advance payments during the year
Planning sections 62A and 81 before the end of the tax year
A tax estimate during the Israeli tax year based on a trial balance for the period: the expected liability under section 62A (excess profitability and wallet companies) and section 81 (undistributed profits), adjusting advance payments and planning distributions.
6 min readRead →